As bad as the U.S. student debt problem appears today, it will likely be much worse five years from now, according to a report released today by the Brookings Institution.

Currently, at almost $1.4 trillion in outstanding loans, student debt is the second-largest source of household debt after housing and the only form of consumer debt that continued to grow after the Great Recession.

According to the new report in Brookings’ Evidence Speaks series, nearly 40 percent of student loan borrowers who entered college in 2004 may default on their student loans by 2023.

The report by Judith Scott-Clayton, a nonresident senior fellow, assessed borrowing and default trends for students who entered college in 1995-96 and 2003-04, starting from when they entered college through up to 20 years of repayment.

Student loan default trends over time were most alarming among students at for-profit colleges, with 52 percent of for-profit borrowers defaulting on their student loans after 12 years — twice the rate of public two-year borrowers. The rate of default among all for-profit student borrowers is 47 percent, nearly four times that of public two-year entrants at 13 percent.

The report also shows that while there exists a high rate of default among college dropouts (24 percent), defaults are even higher among those who complete a postsecondary certificate (28 percent). However, defaults are highest among those with small debts — 37 percent of those who borrow up to $6,125 for undergraduate study default within 12 years, compared with 24 percent of those who borrow more than $24,000.

Additionally, the default rate among black graduates is more than five times the rate of white graduates. In fact, a black undergraduate degree graduate is more likely to default than a white college dropout. For black first-time college entrants in 2004, almost 38 percent defaulted in 12 years — three times the rate of white first-time college entrants from that same year. 

Scott-Clayton argues that the results suggest efforts to address the student loan crisis should focus on regulating the for-profit sector, improving degree attainment, promoting income-contingent loan repayment options for all students, and addressing the challenges faced by college students of color.